The meaning of conditional acceptance
Conditional Acceptance is the acceptance of an offer that contains a condition to which the attention of the other party is specifically drawn. It is a conditional acceptance where there is a counter-offer, sometimes where acceptance has been made conditional upon the other party agreeing to another term. In these circumstances, there has not been an acceptance to the original offer and therefore no contract. Here, the offer could be accepted subject to a change to the clause in the agreement relating to the office space to be let whereas here, it was a warranty relating to the business having cleared stocks of old model and packaging .
The offer must be sufficiently clear to the other party as a reasonable person in those circumstances would know that his or her acceptance would or might cause a movement in price. An example of this would be an acceptance of a discount that is not agreed to in an offer by the offeree but which the offeror has chosen to accept.
Where the condition provided for in the original offer or the counter-offer is subsequently satisfied, the move cannot be successfully resisted on the ground of the inclusion of the condition.
The requirements of a conditional acceptance
To properly understand conditional acceptance, it is important to identify the condition which exists and how that condition relates to something else. Common examples are: 1. A provision in a boiler-plate acceptance form that requires an acceptance to be separately signed by the attorney for a party; 2. An acceptance where the time for performance is expressly subject to future legislative action; and 3. An acceptance of a stipulated settlement or offer of judgment which requires the approval of the bankruptcy court. Conditional acceptance refers to the conditional acceptance of an offer, as opposed to rejection or counteroffer. Conditional acceptance implies that acceptance is conditional on an event. If the condition is satisfied, the offer is accepted. If however the condition is unmet, there is no acceptance. Conditional acceptance offers are usually rejected by courts where the particular event which triggers the acceptance is an intendment of the offeror and as such would constitute a counteroffer (that is, the offeror did not intend to accept the offer if the later budgeting process takes place, the acceptance will terminate). Courts have sometimes found that where a party conditioned an acceptance on its attorney approving the acceptance, a counteroffer was made. See, e.g., Curtis v. Loether, 73 Wis. 2d 50, 75, 74, 741 N.W.2d 809 (2004)(finding a conditional acceptance); Restatement (Second) of Contracts, §70, Comment c. For example, in Bradley Industrial Park v. Municipal Review Comm’n, 569 A.2d 474, 474 (Me. 1990), the condominium bylaws provided that a lease requiring a majority of owners’ approval would be deemed accepted unless a majority of owners returned the approval form stating that the lease was not approved. The court held that the proposal was accepted because the condition satisfied the requirement of a unilateral contract with an offer and acceptance. See also Johnson v. Johnson, 747 S.E.2d 180 (N.C. Ct. App. 2013); but see Gubitosi v. Higden, 2016 WL 699113 (E.D. Mich. June 14, 2016)(holding that while the mortgage agreement contemplated signing the offer in order to effectuate binding acceptance, the offer did not require written re-execution of the term sheet to form a binding agreement). Where the conditional acceptance constitutes acceptance of an offer to enter into an agreement, it presumes that the parties do not intend to be bound until the triggering event occurs. A conditional acceptance that is supported by consideration, however, may bind the parties regardless of whether the condition is satisfied, but it must be clear that the parties intended to enter into an enforceable agreement.
The effect of conditional acceptance on the formation of a contract
Conditional acceptance of an offer effectively modifies the terms of that offer and can serve to establish a new offer that must be accepted. In this way, a conditional acceptance operates as a counter-offer, operating to reject the offer that was originally extended. Even with a seemingly unequivocal "sure," or "yes" as the answer to an offer, a qualified acceptance can be an attempt to execute a contract on different or modified terms. When an attempted acceptance changes the terms of the offer, the offeror can ultimately choose whether he or she will accept that modified offer or not. Doing so will establish a counter-offer, which will be required to be accepted in order to form a valid contract. However, if a party other than the original offeror attempts to accept a qualified acceptance, it is likely that no valid contract will be formed.
A conditional acceptance often modifies the terms of the existing offer by adding new terms or provisions to it, which can then affect its validity. A conditional acceptance that modifies an existing offer is not an unequivocal assent to enter into a contract. It also does not (because of its modified terms) signal a meeting of the minds between the parties regarding the terms of the agreement. If the original offeror does not unconditionally accept clause modifications to the proposed operative terms, a contract is not formed. A conditional acceptance is an attempt to change the terms of the offer and will not create a mutually binding agreement unless the offeror expressly assents to those new terms, thus forming a valid contract (alternatively, if the conditional acceptance were actually a valid acceptance of the terms of the original offer, it would form a valid contract).
A conditional acceptance can have other consequences, beyond whether a valid contract is formed or not. A conditional acceptance (that modifies the existing offer) can also operate to be a valid counter-offer to the proposing offer – depending on the terms of the conditional acceptance and response of the original offeror. A counter-offer can act to terminate the original agreement – as this may be a legally binding agreement, if it is formally accepted by both parties and if a contract is formed, and not otherwise. A counter-offer is a response to an offer that serves to modify the terms of the offer. Effectively, a counter-offer does two things. First, it rejects a prior offer that does not align with the terms of the counter-offer. Second, a counter-offer is a new offer that requires the original offeror to assent to its proposed terms in order to form a valid contract. An attempted acceptance that does not materially modify the terms of a prior offer operates to unconditionally assent to it, and will thus form a legally valid contract. In contrast, a conditional acceptance that attempts to modify the terms of an offer does not form a valid contract.
If a valid contract is not created as a result of a conditional acceptance, and if no new valid counter-offer is created, a conditional acceptance could potentially create true legal issues. For example, a conditional acceptance that attempts to modify term of an offer could, if offered by a third party (an unrelated party who is presumably not the offeror), effectively serve to reject the original offer acceptance and to create no new offer. In such case, a counter-offer (or actually, a superceding offer) has not been created. Thus, the parties now have no contractual relationship, and have no legally binding agreement. Therefore, if the conditional acceptance creates a material change in the underlying offer, and if no new offer is created, the conditional acceptance may operate to create actual legal issues.
Examples of conditional acceptance
Although conditional acceptance of a contract can be confusing, it is the most common type of acceptance. This is because most unilateral contracts are conditional where acceptance is only upon completion of the requested performance. The classic example of this is a unilateral reward contract. In a unilateral reward contract the person promising to pay a reward is not obliged to make a payment unless a person actually performs the type of action that the promise is offering a reward for. Therefore, the offer may not, itself, be a condition of the offeree’s performance. An example of this could be: J offers to pay $100 to anyone who finds the $20 bill he lost in the street and returns it to him. A sees the $20 bill in the street, picks it up, and returns it to J. Because A found and returned the $20 bill to J, he has satisfied the condition of J’s unilateral contract. A does not have to offer anything in exchange because that was not a condition of the contract.
A, a fireman, was hired by X, a building contractor, to put out fires if necessary at the construction site of the new city hall for $50 per day. When he was hired, A said he would do it for $50 per day but "with the understanding" that if two or more of the other firemen A was responsible for performed their duties as well, his $50 would be returned and the $50 would be divided among the other firemen. X said "that’s fine with me." The negotiation was reduced to writing, but the above terms were omitted. A thinks that the contract was not binding because the above condition was omitted, so he refuses to perform. However, X expects A to perform, presumably under the belief that the rest of the firemen will also be performing. A’s offer to perform for $50 per day "with the understanding" that his salary would be returned if others also perform is a conditional acceptance. A’s referent conduct "with the understanding" is not exclusively passed to X, but also to the other firemen as well. X never made a commitment that the other firemen would share their salaries with A. From the perspective of X, he never accepted any condition that was made by A. A’s expectation that the contract included such a condition was not based on any word or act of X. Therefore, the restoration of the $50 to A was not an element of the agreement that had been accepted by the parties and the contract was not subject to A’s prospective performance. Thus, X made a counteroffer to A, which was subsequently accepted by A.
A, a wedding planner, is discussing the details of wedding planning services with B, a bride-to-be. During the meeting, B discusses her vision for her wedding day and expects A to be able to make it happen. After the meeting, A sends an email to B, with a detailed list of items she will provide, along with the price for each item. The email states that the total cost will be $5000, but A cannot accept "until B actually needs the items in her possession." A’s email is not an acceptance because A made her willingness to perform conditional on something other than B’s own act. A could have proficiently communicated her acceptance without mentioning the condition. In addition, A stated that she would not perform until there was a "wedding," even though she did not make that a condition of her offer. For this reason, the parties have not made a contract.
A, a member of a skateboard team, was being filmed for a skateboarding video. The skateboard team received an offer from a skate company to buy the footage, but the skate company demanded that the entire skateboard team participate. A stated that he wanted to accept, but he would only accept "under the condition that a cut of the profits after inversion costs were paid back to the skateboard teams." The skate company stated that this was unreasonable and refused to do business with A. A’s conditional offer was a counteroffer because it offered something that is different from the original offer. The skate company "impliedly rejected" A’s offer, and by doing so, they terminated their negotiations.
The legal effects of conditional acceptance
Conditional acceptance can have numerous legal implications depending on how it is constructed and the context in which it is employed. Indeed, it is not uncommon to find conditional acceptance in an exception clause to a contract. For example, "this contract is subject to a satisfactory result from a judicial review or other litigation process" or "this contract is conditional upon the State undertaking a proper legislative process" or "this contract is conditional upon the approval by Legislature of . . .." In every case, however, conditional acceptance operates as a form of reservation of rights, whereby the proffered language without the qualifying language would result in the immediate creation of legally binding obligations without any further negotiations. See Kelso v. Cline, 26 N.W. 671, 672 (Iowa 1885) (holding that the previous language would create a contract but the conditional language nullified the contract); see generally, McEwen v. Overton, 530 S.W.2d 385, 389 (Tex. 1975). See also Simpson v. Union Pac. R Co., 794 F.2d 1128 (8th Cir. 1986) (upholding enforceability of conditional acceptance clause absent any evidence of intent to create a contract). Where the intent of both parties is to create a contract subject to a condition, the intent will be given effect. See also Industrial Nat’l Bank of R.I. v. Steel Co., Htfd. & N.H.R.R. Co., 487 A.2d 182, 183 (R.I. 1985) (holding that conditional acceptance is different from a counter-offer where the parties intended to create a contract upon the happening of a condition) . The ultimate question will be the intent of the parties which the court may be unable to give effect to if the conditional acceptance is so vague or indefinite as to be susceptible to more than one meaning, or if no meaning at all can be ascribed to the language of conditional acceptance. See Williston, Contracts § 1-18 (4th ed. 1990); Simpson, supra, at 1132. The manifestation of assent must be positively communicated between the parties. See Perini Corp. v. Greate Bay Hotel and Casino, 802 A.2d 1151, 1159 (N.J. 2002); Restatement (Second) of Contracts § 58 Comment c. Further, if the communication fails to state a definite proposal, resumption of prior negotiations does not indicate acceptance. See Simpson, supra, at 1132; Restatement (Second) of Contracts § 58 Comment b; see generally, ID Sec. Systems v. Exec. Sec. Servs. (US), 2003 U.S. Dist. LEXIS 22899 (D. Mass. 2003). Similarly, any actual communications demonstrating an intention to agree upon the terms of the conditional acceptance may or may not be sufficient. Moreover, the fact that a proposed contract may be justifiable on another ground is irrelevant to its enforceability or lack thereof. See Kelso, supra, at 672 (indicating that a counter-offer controlled the parties after the rejection of the conditional offer). These are often hard-fought issues given the critical importance of the effect of conditional acceptance on the potential enforceability of a contract.
How to deal with conditional acceptance in negotiations
Regardless of the circumstances surrounding the necessity of including a conditional acceptance clause in your contracts, it’s essential to know how to handle them properly. It’s possible that a client may use conditional acceptance as the standard wording in all of their contracts, regardless of whether it is necessary or appropriate. That doesn’t, however, mean that a lawyer should adopt the same blanket policy. It is vitally important to assess each contract individually and determine if including a conditional acceptance clause is warranted. If you don’t feel that it is, then you need to communicate that clearly to your client. The best way to handle conditional acceptance in contract negotiations is by being clear and specific about what the acceptance is contingent upon. As with any other part of a contract, if you don’t clarify it upfront, then there may be assumptions made down the road that will ultimately put you in a tough spot. Your first step in avoiding problems later on is to make sure that you’ve clearly communicated who will determine whether the conditions have been met as well as what the actual conditions are. Will it be the client? A third party? Will contingencies be defined via the contract, or will they be left up to the discretion of the other party? It’s not only important to be clear with your client, but if possible, you should also spell out the details even further when drafting the contract. You can do this by including a provision that clearly outlines the conditions for the conditional acceptance, who will determine if conditions are met and how they will make the determination, and how and when the decision should be communicated. This kind of clarity can help all parties involved understand what is expected of them. It can also help keep the contract negotiations smooth and allow the parties to move forward quickly and without confusion. In addition to being clear with your client, when including a conditional acceptance clause in your contract, you need to be clear on all other relevant terms of the contract to avoid any miscommunication that could result in a dispute. This can include clarifying what constitutes acceptance of the contract itself. This may seem like an obvious and straightforward point, but in order to fully understand the law surrounding conditional acceptance it’s vital to spell out the specifics. If a party says they’re accepting a contract conditionally, how is that acceptance being communicated? How is the other party communicating acceptance back, or are they not communicating anything at all? Does one or both of the parties’ acceptance depend on action? Do they have to specifically name the clauses they are accepting in order to fully accept them? Are there any other specific steps that they need to take in order to achieve acceptance, or is verbal agreement sufficient? Again, while it may seem obvious, these are some of the most common points that people overlook when it comes to conditional acceptance clauses, and thus they are also the ones that are most likely to lead to a dispute at some point. So be sure to go over them with your client as well and include them when drafting the contract. It’s also important to make sure that your client understands changing conditional acceptance clauses. While a contract may contain a clause or provision for conditional acceptance, that doesn’t mean that it can’t be altered in a negotiation. In fact, in order for a party to be able to accept a contract conditionally, that party needs to be able to completely agree with the contract. That means that the party has the right to delete, add, or change any clauses or provisions that they would like. If they would like to insert a conditional acceptance clause in order to be able to agree to a contract, then it is perfectly within their rights to insist on that. However, if they are hoping to be able to accept a contract conditionally, then they need to be willing to allow the other party to add, remove, or change any clauses that they like. They don’t have the right to demand that the other party accept the contract conditionally, and then change their mind and expect the other party to adhere to the original contract. Not only is there no case law to support such a case, but it is inconsistent with the basic nature of contract negotiations. Rather, once a party has agreed to a contract unconditionally, they do not have the right to demand that any changes be made so that they can then accept the contract conditionally.
Conditional acceptance v counteroffer
Any attempted acceptance which includes additional or different terms is a counter-offer. In such a case, the original offer is extinguished and the parties cannot be said to have reached agreement on any of the proposed terms. For example, if the proposed agreement includes a term relating to payment by state D, the offer must be rejected. However, if the additional terms are proposed as conditions, then the offeree can still accept the offer. For example, person A offers to sell a car to person B for 1,000 on the understanding that person A will pay person C £100 for them collecting the car from him. Person B indicates that they will accept the offer if person A pays person C £50 for the collection. In such circumstances, this does not destroy the original offer. Person B has made a conditional acceptance, and so will be bound upon the fulfilment of the condition provided that the other requirements of a contract are fulfilled. Due to the fact that an offer can be revoked at any time before acceptance, if the condition of the conditional acceptance is not fulfilled, the original offer no longer exists, and person A can withdraw the offer. Person B can, under the principle of waiver, waive the condition relating to them receiving £50 from person A for the car collection. In this instance, person B will be bound under the contract as laid out in the original offer.
Navigating conditional acceptance conclusively
In conclusion, conditional acceptance is a nuanced concept within contract law that requires careful attention to detail and an understanding of its implications. By recognizing the ways in which a conditional acceptance can introduce new terms to an agreement or fail to create a binding contract, both parties can more effectively negotiate and enter into valid and enforceable agreements. The key takeaways for effectively navigating conditional acceptance in contract negotiations include the following:
1. Understand the concept: Conditional acceptance occurs when one party accepts an agreement on the condition that certain additional terms are met. It has the power to create a binding contract if the conditions are met, but it can also introduce new terms into the agreement that one or both parties may not have intended.
2 . Look for language cues: Phrasing such as "we have agreed to this proposal subject to the following conditions" or "this email is binding and enforceable upon the following conditions" can signal a conditional acceptance. Parties should be on the lookout for such language in emails and other correspondence.
3. Avoid conditional acceptance: To avoid a conditional acceptance, it is important to ensure that all terms are included in the original agreement or counter-offer. Contracts should be clear and detailed, leaving no room for ambiguity or room for interpretation.
4. Seek legal assistance: If there is any doubt about whether an agreement constitutes a conditional acceptance or whether conditions were met, it is always best to seek the advice of an attorney. They can provide valuable counsel on how to navigate the complexities of contract law and offer guidance on how to best protect your interests.